On April 11, the price of Terra (LUNA) fell as a broader slump in crypto assets added to the uncertainty around its token burning mechanism.
The collapse of Bitcoin (BTC) and Ether (ETH) led to a slump in the remainder of the cryptocurrency market, with LUNA’s price falling over 8% to approximately $91.50, and nearly 30% from its record high of $120 reached on April 6.
After the Federal Reserve declared its intentions to hike interest rates and cut balance sheets dramatically to combat growing inflation, the overall drop followed similar swings in the US stock market last week.
The high correlation between LUNA and BTC so far this year puts it at danger of further decline if BTC does not recover.
Recent controversies
At least two “exposé” threads that went popular on Twitter over the weekend provided more adverse cues to LUNA.
The first discussion, started on April 7 by a pseudonymous analyst named @DeFi Made Here, questioned LUNA’s capacity to maintain the peg of TerraUSD (UST), Terra’s native stablecoin, because it is not backed by any actual asset.
The second thread, written by Jack Niewold, an analyst at the Crypto Pragmatist – a DeFi publication — accused Terra co-founder Do Kwon of getting all of the LUNA tokens intended to be “burned” to create UST on April 9.
In a tweet-to-tweet reaction to Niewold, Kwon rejected the charges, calling him “made up clickbait.” Terra burns LUNA 1:1 to create a new UST, according to the self-proclaimed “master of stablecoin,” as evidenced by a swap on the Anchor Protocol dashboard.
Jose Maria Macedo, the founder and CEO of crypto research platform Delphi Digital, called Niewold’s post “absolutely terrible.”
The Road ahead for LUNA price
In addition, the most recent LUNA selloff pushed the currency’s price below its major moving average support against the US dollar.
The Terra token has fallen below its 50-day exponential moving average (50-day EMA; red wave in the chart below), which is now under $90, almost two months after reclaiming it as support.
The most recent support-to-resistance flip puts LUNA Price in danger of extending its downtrend toward its 200-day EMA (the blue wave) in April, which is about $67 (around 20% lower than April 11’s price).
The 0.382 Fib line of the Fibonacci retracement graph, drawn from the $4 swing low to the $106 swing high, also coincides with the 200-day EMA, providing LUNA with double-layered support against bears.
An early rebound from the 0.236 Fib line (around $82), on the other hand, may see LUNA retest $106 as an interim upside goal.
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Source: https://coinpedia.org/altcoin/terra-luna-price-fall-below-80-in-next-48-hours/